Digital Assistants and the Rise of Voice Search: Device Roundup

This is the second installment of a blog series that explores the current state of digital assistants and their impact on the e-commerce industry.

As we touched on in our opening post, there are five key players (thus far) in the digital assistant space. This post will outline the various devices and technology that each has introduced or announced. Each player’s motivations give us ideas on their aspirations in this space, which generally revolve around opening a new revenue stream or protecting an existing one.

Google: Protect and grow search advertising

Amazon: Sell more stuff

Microsoft: Search advertising and augment PC business

Apple: Less clear; possibly to protect against Spotify/Pandora services that are common apps

Alibaba: Sell more stuff

Current available digital assistantsNumber of apps/skills

Price Points and Reviews

Of these devices, several have yet to launch (Microsoft’s and Apple’s) and others are just now launching (Tmall Genie). Despite Siri being really the first widely used voice assistant, Amazon has built a pretty significant lead here in terms of devices sold and this lead appears to be accelerating.

On Prime Day 2017, Amazon reported they sold 7x more Echo devices than the prior year. Not surprisingly, Amazon has been very aggressive in terms of price points, dropping the Echo to just $89 on Prime Day.

Apple, conversely, has taken a premium position and the Home Pod is expected to retail for more than $300. Apple is positioning it as offering premium sound relative to other Bluetooth speakers. It will be interesting to see if that works given a large segment of consumers have only ever known mp3 music through Apple factory earbuds.

Market Share

Recent data from eMarketer estimates there are 36 million digital assistants in active use.

Amazon has created a fairly sizeable lead here and continues to introduce new versions of its original assistants (Tap, Dot) as well as the newer form factors such as the Look and the Show. Like many things in e-commerce, Amazon is lapping the competition while others are still getting ready to race. Additionally, given the low entry price of the Dot, Amazon is really enabling a whole group of skeptical consumers to take a flyer on the device given the relatively low price point.

Of course, first mover doesn’t equate to ultimate winner in a space (see Compuserve in internet access for an example). However, in addition to device sales, Amazon is far ahead in terms of the capabilities that its assistants can run. There are various names for these additional capabilities — Amazon and Microsoft call them “skills,” Google refers to them as “voice apps” or “actions.”

You can think of these voice-based apps as very similar to how apps relate to a mobile platform (iOS or Android). Just as mobile apps extended dramatically the notion of what can be done through the mobile phone, the same is true today with digital assistants and voice apps. The reality is that mass market adoption only happens when both good hardware and an extensive ecosystem of apps are present. Imagine a mobile phone that was slightly superior to the latest iPhone but didn’t run very many apps – it would be very difficult to gain adoption. Apps represent a very strong network effect, with each app increasing the value of the network.

Today, as you can see in the chart below, Amazon is far and away the leader in voice apps.

In fact, Amazon continues to add apps (or “skills” in their vernacular) at a much faster pace. Of course, quantity alone doesn’t mean everything; however, at this early stage you can think of this as throwing more things at the wall and seeing what sticks. Many of these apps will not prove to be useful or popular but the volume gives them that many more shots on goal.

According to VoiceBot, in June 2017 Amazon added 37 times as many apps as Google, which is remarkable given the disparity in the number of apps each has. According to Amazon, the top categories of skills as of February 2017 were:

News

Gaming

Education/Reference

Lifestyle

Novelty/Humor

As consumers utilize more skills, the value of the device increases. Realistically, many of these apps don’t get used beyond an initial try, which is very similar to the challenge that app developers have in mobile. At this stage, it’s more a function of casting a very wide net and seeing what resonates with consumers. Amazon leverages the power of its reviews and website to present these skills but ultimately will need better tools to allow consumers to sift through all the noise and find the apps most relevant to them.

Thus far, the apps that are shopping related are fairly limited as brands and retailers work to figure out what works here. One interesting one is from REI, which leverages Alexa to state the REI deal of the day, even though REI doesn’t sell through Amazon. Most other shopping skills on Alexa today are around functions like finding daily deals.

Stay tuned for next week’s installment, where we’ll look at what voice search and commerce look like in the near term.